UK retailers urge ministers to expand credit insurance scheme
Retailers are urging the UK government to expand its trade credit insurance guarantee program, fearing that many will be compensated when their insurance ends.
Trade credit reinsurance scheme Introduced in May 2020 We also indemnify professional insurers who cover our suppliers against the risk of non-payment by our customers.
The UK Retail Consortium, in a letter to Business Minister Paul Scully, argues that many insurers are not covered if they conduct a risk assessment based on the retailer’s recent financial performance.
A letter from the Financial Times said the withdrawal of support was a “serious concern” and members “have already heard from several providers that major insurers have announced they will withdraw their coverage.”
According to the BRC, insurers typically need at least six months of consistent and robust transaction data before reassessing coverage decisions. “Obviously, this is still not possible for a significant proportion of the retail sector, which remains closed for most of 2020-2021.”
The letter further added that insurers are slow to rethink their underwriting decisions, even though retailers have provided provisional data, but insurers have almost reduced their overall coverage to pre-pandemic levels. And take into account the trade turmoil of the past year.
“I was not well placed before the pandemic, but it would make matters worse,” said Mike Stott, credit insurance broker at Lycroft Associates.
Insurers who had to give over 90% of their premiums to the government in exchange for state guarantees said, “We have to make money this year and if a tsunami hits I can’t do it. “
“They would not want to take advantage of cover-up opportunities without appropriate supporting information,” he said.
Suppliers and their lenders may be nervous about providing uninsured credit to retailers whose balance sheets have been damaged by the forced closure of stores during the lockdown. This is forcing some retailers to prepay for their merchandise as they build their inventory for Christmas, which can put pressure on significant cash flow.
“It’s a big deal for us,” said the CEO of a small clothing retailer. “About 10% of my annual sales are related to prepayments that I don’t have to pay if the supplier insures me. I can double my annual capital investment.
“I have suggested to all credit insurers, they support the plan, but they want to see a profit over two years,” he added.
Retail sales have recovered significantly since the UK’s non-essential stores reopened in mid-April, but demand remains difficult to predict and operating costs will rise shortly.
Data released last week by consulting firm Springboard shows the recovery in retailers since indoor hotels were allowed to reopen on May 17. Calmer Provided that.
The business rate vacations will end on June 30, but small retailers will continue to enjoy discounts and vacation plans will gradually decline over the summer.
Euler Hermes, one of the UK’s largest credit insurers and a member of the reinsurance program, expects economic and corporate credit risk to remain at high levels: “
“We are already in contact with our customers and business partners to promote a smooth transition,” he added.
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